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The government has seen a rush of service tax defaulters to declare dues under the Voluntary Compliance Encouragement Scheme (VCES) which ends on December 31. 

VCES, which was introduced during last budget session, allows a service tax defaulter to pay dues without any penalty/late payment charges. The finance minister had earlier said that there are nearly 1.7 million registered assessees under service tax, but only about 0.7 million or less than half file returns. 

The dues have to be paid in one or two instalments before prescribed dates. In such a case, interest, penalty and other consequences will be waived. Tax defaulters have to pay half of the declared tax dues for a period between October 1, 2007 and December 31, 2012, failing which they would be ineligible for the scheme.

As per a press note, in the last four days alone (December 26-29), the government has received over 16,000 applications involving Rs 1,500 crore of service tax dues. This takes the total declarations to over 40,000 involving over Rs 5,500 crore. 

“This would broadly correspond to Rs 55,000 crore of services, which have escaped the tax net," according to a finance ministry statement.

The first such tax amnesty scheme was announced in 1997 under VDIS.

(Edited by Joby Puthuparampil Johnson)

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